Smart Machinery: Building Taichung into a World Powerhouse

The Smart Machinery portion of the 5+2 Innovative Industries plan is an upgraded and expanded version of the Industry 4.0 initiative started under the Ma Ying-jeou administration. It has already seen some success in promoting Taiwan’s machinery sector, which achieved an output value of NT$1.1 trillion (US$36.7 billion) last year and is expected to pass NT$1.2 trillion this year.

The current initiative aims to leverage Taiwan’s prowess in ICT and machinery – and its ambitions to develop capabilities in aerospace – by expanding those strengths through shared research and resources. The plan also calls for the creation of teams and demo sites to help low-margin small and medium enterprises (SMEs), whose R&D budgets are inevitably quite meager, take advantage of the latest Industry 4.0 developments to raise profits and enhance Taiwan’s manufacturing competitiveness internationally.

Industry 4.0 involves using the latest in the internet of things (IoT), automation and robotics, big data, connectivity, artificial intelligence, customized production techniques (such as 3D printing), and other technologies to create production systems that are flexible, customizable, self-improving, and interconnected. Examples include networking the production lines of multiple factories across different countries for seamless production, automating the process of making individualized custom items, or constantly monitoring large amounts of data to continuously introduce improvements in production efficiency.

Some of the challenges to implementation include resistance to changing from traditional methods, difficulty finding the appropriate talent across various disciplines needed to create the systems, lack of conformity between different systems and standards, regulatory hurdles, and a shortage of available industrial land.

The Tsai Ing-wen administration has increased funding for the program and provided tax incentives for new investments that meet certain criteria. It has also sought to reduce regulatory hurdles, especially with an eye to attracting technology and expertise from abroad. A new Act for the Recruitment and Employment of Foreign Professional Talent took effect in February this year, for example.

To encourage foreign companies to set up R&D centers in Taiwan, the government is offering subsidies of up to 50% on establishment costs. Additionally, subsidies covering 40-50% of total development funding are being offered for “strategic products, services or industries,” especially cutting-edge technologies that are not yet mature domestically. Startup funding is also included in the plan, offered through the Taiwania Capital Management Corp., the national investment company founded last year.

A new wrinkle in the administration’s plans entails partnering with the Taichung City Government as a way to help tackle the talent, coordination, and land issues. Taichung is the center of Taiwan’s well-developed machinery and fledgling aerospace industries, as well as a major location for the ICT sector. The resulting Smart Machinery Promotion Program is supervised by the Ministry of Economic Affairs, with participation by the Ministry’s Industrial Development Bureau, as well as the non-profit Precision Machinery Research and Development Center (PMC) and the Taichung City Government.

The headquarters of the program is the Smart Machinery Promotion Office (SMPO), which opened in Taichung earlier this year. The office coordinates collaboration among a group of 28 research universities. Taichung’s Central Taiwan Science Park (CTSP), along with science parks in Tainan and Kaohsiung, is taking the lead in robotics. Additionally, with support from the Industrial Technology Research Institute, Taichung’s Precision Machinery Innovation Technology Park built a “Smart Manufacturing Trial Operation Field” with nine model automated assembly lines.

Various sites in central and southern Taiwan have been identified as possible solutions to the land shortage problem, including the CTSP, which is being expanded to accommodate more manufacturers. But the two centerpiece dedicated “smart” industrial parks are to be located in Taichung. Currently companies are preparing to move into one such zone, the Shuinan Smart City project, located on the site of the former airport. The other is the Shengang Fengzhou Technology Park, which is slated to begin attracting occupants at the end of this year.

The Shuinan Smart City project is also due to be the site of a planned central coordination, demo, and R&D center, whose two buildings are now under construction and are scheduled to be completed in 2019 and 2021. This center will take over many of the disparate activities currently being undertaken.

“Three or five years in the future, there will be an R&D cluster in the Shuinan area,” SMPO Director-General Tristan Yau-jr Liu told Taiwan Business TOPICS. He said the government is eager to “get it up and running” as early as possible, and looks forward to the day when the “government can step out gradually and let the private sector take it over – take it into the future.”

Courtney Donovan Smith (石東文) is a publisher of the Compass Magazine, current chairman of the Taichung American Chamber of Commerce, the Central Taiwan correspondent for ICRT Radio, the founder of the popular Taiwan News in English Facebook group and is an organizer of rock festivals including the Compass Food and Music Festival.

Taiwan Business TOPICS

Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei, and covers current topic affecting business conditions in Taiwan, an Industry Focus section on a particular industrial sector, and other reports prepared by the magazine’s staff of experienced professional journalists.